Labels seek end to 99c music per song download By Andrew Orlowski in San Francisco Published Friday 9th April 2004 02:32 GMT Remember how online music stores were going to route around the music industry? The pigopolists have barely got their feet under the table and already demanding more. The Wall Street Journal reports that the major five labels think that 99 cents per song is too cheap, and are discussing a price hike that would increase the tariff to $1.25 up to $2.99 per song. The current tariff is too much for most people, as saggy sales indicate. "99 cents a song is a pricing model designed to protect CD sales, and not one designed to move people into a new digital music marketplace," senior staff attorney at the Electronic Frontier Foundation Fred Lohmann told us recently. "If an iPod has room for 4,000, does Apple think people are getting to spend $4,000 filling it with music?" As it is, online music stores are a loss leader, or barely cover operating expenses. Apple alone can consider its online store a success: it has driven demand for its iPod and given itself a toe-hold in a valuable new consumer market. Some analysts reckon Apple's cut is as high as 33 cents, but once the bandwidth, manpower and marketing are counted - and let's not forget that Apple pays Thomson an MP3 licensing fee on the iTunes software it gives away - there's very little to the bottom line. What it does do is indirectly help the iPod. The iPod's success wasn't always assured. Almost exactly two years ago, we reported that Apple had seen a 50 per cent drop in demand for the iPod, launched to great fanfare, and an apologetic CFO Fred Anderson "defended the figures, and said other MP3 manufacturers had seen steeper declines". In the last quarter Apple generated $256 million worth of income from iPod sales and admitted it could have been higher if it had made more. It's not a pretty picture for the other download services, all of which take the distribution costs onboard. What does the customer get for this? A very low bit rate file encumbered with DRM. Now the major labels want to make online music downloads even more expensive than conventional CDs, so customers are invited to pay more for less. The major labels want us to view the DRM-encumbered download services as the carrot to the legal stick. But paying more for less is a business proposition that has only worked for the record industry when it has been able to make the previous generation of technology, such as vinyl, obsolete. It doesn't have that option anymore. CD sales and "pirate" downloads dwarf DRM online downloads. Von Lohmann thinks the online services may yet be a success, although they need to offer much more for less. "Maybe. With no DRM, and by bringing the price way down and by having much more music - at 25 cents a song or with a flat rate pricing. That could be compelling." ® http://www.theregister.co.uk/2004/04/09/pigopolist_price_hike/
Yet one more reason to despise the RIAA. They actually want us to pay MORE for lower quality music without hte add-ons that you get when you buy a CD. Their failed business model is so bad that they are going to try to protect it at any cost, including the loss of fair use rights that consumers have traditionally had. Maybe I'll just stop buying major label music altogether.
I was onboard for the 99-cent program. Not anymore. Greedy bastards. Of course, I'm greedy for downloading the music for free. So it's all good.
nothing the RIAA does surprises me anymore. I am just glad that many of my favorite artists have jumped ship and are in the process of signing on with an independent label.
What the RIAA really needs to do is offer a "gift certificate" with each download toward the purchase the CD. Of course that would be a customer friendly policy and thus would never be considered.
Others prob have not seen this thread yet, but this software is outstanding. A little buggy, but effective!
I agree with that, Cohen. The biggest problem for me so far are songs fading from one to the next, but when that happens either nuke the tune and wait for it to turn up again on another station or I use an audio editor to strip out what I don't want. It goes without saying, but life is easier if you rip from the higher bitrates.
The indie label thing has a LONG way to go before being viable. As it is, bands that sign to indie labels basically make no money off of record sales. They can survive if they play 200-250 shows per year and sell a crapload of merchandise, but even that is sketchy since club gigs MIGHT pay $500 per gig on weeknights. Split that between four people and a sound guy - plus the fee to the booking agent - after you pay for travel expenses and food and you barely break even. The new model really seems to be second-job artists - artists that perform on a limited basis while retaining day jobs or doing freelance work. This is becoming more and more common, especially among recording studio owners who can record themselves (or their bands) and keep working on other projects for money. There is also the multi-project model where musicians play with multiple bands at the same time in order to make ends meet. Ultimately, there will be a massive change. There will have to be for the industry to survive.
Does anyone know the business case for 99 c downloads? Guess: Out of the 99c, xx goes to the label xx goes to the artist xx goes to ... xx goes to ... How much is left for Apple?
So true. Luckily the artists i were referring to are pretty established. Pearl Jam left Epic records and Hootie left Atlantic records this past year. Both still play in front of 5,000 to 15,000 a night so i think they'll be alright. I read somewhere that the 4 members of Hootie made $2.50 per album split among each other. The label that is putting out their next album will give them an increase to $5.00.
I think $2.50 is high. Even the biggest artsits get under 5 percentage points off of CD sales after recoup costs (recording costs, distribution expenses, etc). Last I saw, Michael Jackson had the highest at 6 points. Even if a CD cost $20, that only pays him a little more than a dollar per CD sold. Indie labels definitely pay more per CD sold, but the average sale on any BIG indie label is under 50,000 units. Hootie can probably do significantly better, but even 1/4 million copies isn't much when you consider Cracked Rear Window sold, what, 10 million copies worldwide. Most artists, even well-respected indie artists, don't sell more than 10,000 CD's in the year after a release. If they do, they are almost immediately snatched up by one of the major labels knowing the band can already push record sales for them. The best example of a GREAT success story in the indie music business is Ani DiFranco. Her own label does extremely well for an indie.
the labels get 70% and apple pockets 30%. if apple has sold 50million songs, this means the labels take is $35M. the big 5 get about 90% of that 35M, or just over 30M to split 5 ways. 6M is barely the marketing budget for janet jackson's latest CD. you can bet the artists see pennies on a download, if that. as for apple, no way $15M covers it's costs, server space, developmental costs, and most importantly bandwidth. iTMS is a loss leader for apple, to sell more iPods.
If the labels get 70 % and Apple 30 %, where does that leave license fees for the software that Apple uses, for the audio format used, etc... I assume you mean that this is included in Apple's 30 %, and that the artists' share is included in the labels' share. You are approximately right. It is not necessarily a loss-making business for Apple, but you are correct that the business case is primarily based on generating profit from iPod hardware sales for now. From research, I have an idea of an approximation, but I would love to get a hold of the exact split of the 99 c, as one could have it if one had access to Apple's business plans, etc. .
But the consensus among music executives, who asked not to be named, is that on every 99-cent download bought from iTunes, Apple takes about 10 cents, after it has paid 65 cents in record company royalties and 25 cents in credit card fees and distribution costs. http://www.macobserver.com/article/2004/04/06.13.shtml
